In a recent decision, the Third Circuit took sides in a split between U.S. Circuit Courts of Appeal over what action borrowers must take to exercise their right to rescind a loan under the Truth in Lending Act (TILA). It ruled that borrowers need only send lenders valid notice within the time allowed under the statute in order to rescind a loan agreement.
TILA requires lenders to make certain disclosures of credit terms to potential borrowers. Even if borrowers receive these disclosures, they have an absolute right to rescind a loan secured by a principal dwelling for a period of three days after closing on the loan. If they get the disclosures after the loan commences, they have three days to rescind the loan after they are received. If they never receive the requisite disclosures, the right to rescind “expire[s] three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first.” 15 U.S.C. § 1635(f).
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Topics: Disclosure Requirements, Lenders, Mortgages, Notice Requirements, Rescission, Split of Authority, TILA
Published In: Civil Procedure Updates, General Business Updates, Conflict of Laws Updates, Finance & Banking Updates, Residential Real Estate Updates
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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